The yearly maximum guaranteed benefit for a 65-year-old retiree under the Pension Benefit Guaranty Corporation (PBGC) insurance program will increase to almost $57,500 in 2013, up from $56,000 in 2012. Beginning in 2013, the PBGC announced November 27, 2012 that the maximum yearly guarantee for a 65-year-old retiree is $57,477.24. The increase is not retroactive.

The slight increase in the guaranteed benefit is likely to be meaningful for the many pensioners receiving benefits under pension plans covered by the PBGC insurance program. This program insures guaranteed benefits amounts for pensioners of defined benefit plans covered by the PBGC insurance programs that are underfunded under the PBGC rules when terminated and otherwise meet program requirements. Most retirees who get their pension from PBGC — almost 85 percent — receive the full amount of their promised benefit. In some cases, retirees can receive more than the PBGC maximum guarantee.

The PBGC maximum guarantee is based on a formula prescribed by federal law. Yearly amounts are higher for people older than age 65, and lower for those who retire earlier or choose survivor benefits (see chart). If a pension plan ends in 2013, but a retiree does not begin collecting benefits until a future year, the 2013 rates still apply. For plans that terminate as a result of bankruptcy, the maximum yearly rates are guided by the limits in effect on the day the bankruptcy started, not the day the plan ended.

The following chart shows the 2013 annual and monthly maximum benefit guarantees for retirees from ages 45 to 75. The maximum amount is lower for retirees who begin getting benefits at ages below 65, reflecting the fact that younger retirees receive more monthly pension checks over a longer lifetime. The maximum amount is higher for benefits starting at ages above 65, because older retirees receive fewer monthly pension checks over their expected lifetimes.

PBGC Maximum Monthly Guarantees for 2013

Age

Annual Maximum

Monthly Maximum

Monthly Joint and 50% Survivor Maximum*

75

174,730.80

14,560.90

13,104.81

74

158,867.04

13,238.92

11,915.03

73

143,003.40

11,916.95

10,725.26

72

127,139.64

10,594.97

9,535.47

71

111,275.88

9,272.99

8,345.69

70

95,412.24

7,951.02

7,155.92

69

85,641.12

7,136.76

6,423.08

68

77,019.48

6,418.29

5,776.46

67

69,547.44

5,795.62

5,216.06

66

63,225.00

5,268.75

4,741.88

65

57,477.24

4,789.77

4,310.79

64

53,453.88

4,454.49

4,009.04

63

49,430.40

4,119.20

3,707.28

62

45,407.04

3,783.92

3,405.53

61

41,383.56

3,448.63

3,103.77

60

37,360.20

3,113.35

2,802.02

59

35,061.12

2,921.76

2,629.58

58

32,762.04

2,730.17

2,457.15

57

30,462.96

2,538.58

2,284.72

56

28,163.88

2,346.99

2,112.29

55

25,864.80

2,155.40

1,939.86

54

24,715.20

2,059.60

1,853.64

53

23,565.72

1,963.81

1,767.43

52

22,416.12

1,868.01

1,681.21

51

21,266.52

1,772.21

1,594.99

50

20,117.04

1,676.42

1,508.78

49

18,967.44

1,580.62

1,422.56

48

17,817.96

1,484.83

1,336.35

47

16,668.36

1,389.03

1,250.13

46

15,518.88

1,293.24

1,163.92

45

14,369.28

1,197.44

1,077.70

* Both spouses the same age

The PBGC insurance program is funded through insurance premiums paid by covered plans. In recent years, the number of underfunded plans has increased due to a lagging economy, declines in market performance and other factors. The demands on the PBGC insurance program prompted Congress to increase premiums, modify pension funding rules and enact various other reforms in an effort to shore up the PBGC insurance program. The PBGC also has undertaken a number of regulatory and operational reforms. Companies sponsoring plans covered by the PBGC insurance program should review their existing funding and insurance requirements to ensure that they are in compliance with existing rules and taking advantage of the most favorable opportunities under these rules. In addition, companies sponsoring defined benefit plans govered by the PBGC insurance program and/or the Internal Revenue Code and Employee Retirement Income Security Act’s minimum funding rules or entities that are part of commonly controlled or affiliated groups of companies, purchasing stock or assets from such company groups or lending to or investing in such entities should evaluate the funding status of these programs and the responsibilities and liability exposures that might impact their interests.

If you need help reviewing and updating, administering or defending your employee benefit, human resources, insurance, health care matters or related documents or practices to respond to emerging health plan regulations, monitoring or commenting on these rules, defending your health plan or its administration, or other health or employee benefit, human resources or risk management concerns, please contact the author of this update, Cynthia Marcotte Stamer.

About Ms. Stamer

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 24 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

A board certified labor and employment attorney widely known for her extensive and creative knowledge and experienced with these and other employment, employee benefit and compensation matters, Ms. Stamer continuously advises and assists employers, employee benefit plans, their sponsoring employers, fiduciaries, insurers, administrators, service providers, insurers and others to monitor and respond to evolving legal and operational requirements and to design, administer, document and defend medical and other welfare benefit, qualified and non-qualified deferred compensation and retirement, severance and other employee benefit, compensation, and human resources, management and other programs and practices tailored to the client’s human resources, employee benefits or other management goals. A primary drafter of the Bolivian Social Security pension privatization law, Ms. Stamer also works extensively with management, service provider and other clients to monitor legislative and regulatory developments and to deal with Congressional and state legislators, regulators, and enforcement officials concerning regulatory, investigatory or enforcement concerns.

Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the Editorial Advisory Board of Employee Benefits News, the editor and publisher of Solutions Law Press HR & Benefits Updateand other Solutions Law Press Publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations. She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern and many other national and local publications. You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and registerto receive future updates about developments on these and other concerns see here or contact Ms. Stamer via telephone at 469.767.8872 or via e-mail to cstamer@solutionslawyer.net.

About Solutions Law Press

Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources at www.solutionslawpress.comincluding:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile at here or e-mailing this information here.